State court judge's order denying motion to dismiss

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: PART 41

THE PEOPLE OF THE STATE OF NEW YORK, :

Indictment Number 4447/12

-against- :

SERGEY ALEYNIKOV, : Decision & Order

Defendant. :

x

ZWEIBEL, J. :

Defendant moves to dismiss the instant indictment on the
ground of facial insufficiency, double jeopardy, collateral
estoppel, vindictive prosecution and in the interest of justice.

Background 1

Goldman Sachs & Co. ("Goldman") is an international
financial services firm which engages in high frequency trading
("HFT") on securities and commodities markets, such as the New
York Stock Exchange ("NYSE") and NASDAQ Stock Market ("NASDAQ") ,
as part of its business. From May 2007 through June 2009,
defendant was employed by Goldman as a computer programmer in its
Equities Division, developing and maintaining certain computer
programs for the company's proprietary HFT system. A HFT system
is a mechanism for making large volumes of trades in securities

1 The Court has adopted or adapted the relevant portions of
United States Court of Appeals for the Second Circuit' s
description of the background of this case through the Court' s
dismissal of the federal action and has added or deleted from it
where relevant (see United States v. Aleynikov , 676 F.3d 71, 73-
75 [2d Cir. 2012] ) .

and commodities based on trading decisions effected in fractions
of a second through algorithms that incorporate rapid market
developments and data from past trades. The computer programs
used to operate Goldman's HFT system are of three kinds: [1]
market connectivity programs that process real-time market data
and execute trades; [2] programs that use algorithms to determine
which trades to make; and [3] infrastructure programs that
facilitate the flow of information throughout the trading system
and monitor the system's performance. Aleynikov's work focused on
developing source codes for this last category of infrastructure
programs in Goldman's HFT system. HFT is a competitive business
that depends in large part on the speed with which information
can be processed to seize fleeting market opportunities. Goldman
closely guards the secrecy of each component of the system, and
does not license the system to anyone . Goldman ' s confidentiality
policies bound defendant to keep in strict confidence all the
firm's proprietary information, including any intellectual
property created by defendant. 2 He was barred as well from taking

defendant, as a condition of his employment, was required
to sign a global information security policy, which provided in
relevant part that he would "hold all confidential and
proprietary information and materials in strict confidence and,
except for the above authorized uses, will not, nor permit any
agent to give, disclose, copy, reproduce, sell, assign, license,
market or transfer confidential and proprietary information and
materials to any person, firm or corporation..." The security

2

it or using it when his employment ended.

By 2009, Aleynikov was earning $400,000, the highest-paid of
the twenty- five programmers in his group. In April 2009, he
accepted an offer to become an Executive Vice President at Teza
Technologies LLC, a Chicago-based startup firm, that was looking
to develop its own HFT system. Aleynikov was hired, at
approximately $1 million a year, to develop the market
connectivity and infrastructure components of Teza's HFT system.
Teza's founder (a former head of HFT at Chicago-based hedge fund
Citadel Investment Group) emailed Aleynikov (and several other
employees) in late May, conveying his expectation that they would
develop a functional trading system within six months. It
usually takes years for a team of programmers to develop a HFT
system from scratch.

After defendant resigned from Goldman in April of 2009, he
was allowed to remain at the firm for five weeks more .
Aleynikov' s last day at Goldman was June 5, 2009.

From March 30, 2009 until May 2009, defendant uploaded data

policy also provided that defendant "irrevocably assign" to
Goldman and that Goldman would have "exclusive ownership rights,
including, without limitation, all patents, copyright and trade
secret rights with respect to any work, including, but not
limited to, any invention, discoveries, concepts, ideas or
information, conceived" by defendant during the course of his
employment with Goldman. 99

3

from Goldman to a "subversion" website, with an address of
svn.xp-dev.com. At approximately 5:20 p.m., just before his
going-away party, defendant encrypted and uploaded to the
subversion server in Germany more than 500,000 lines of source
code for Goldman's HFT system, including code for a substantial
part of the infrastructure, and some of the algorithms and market
data connectivity programs. Some of the code pertained to
programs that could operate independently of the rest of the
Goldman system and could be integrated into a competitor's
system. In addition to proprietary source code, Aleynikov also
transferred some open source software licensed for use by the
public that was mixed in with Goldman's proprietary code.
However, he uploaded a greater number of files that contained
proprietary code than open source code 3 .

After uploading the source code, Aleynikov deleted the
encryption program as well as the "bash" history of his computer
commands. When he returned to his home in New Jersey, Aleynikov
downloaded the source code and other material he had stored on
the server in Germany to his home computer, and copied some of
the files to other computer devices he owned.

3 "Open source" code is available to the public on-line at no
cost. For instance, part of Goldman's HFT system runs on the
Linux operating system which is completely composed of open
source code .

4

Defendant' s uploads to the subversion website attracted the
attention of Goldman's computer security team on June 29, 2009.
Goldman then alerted the authorities. On July 2, 2009, Aleynikov
flew from New Jersey to Chicago to attend meetings at Teza. He
brought with him a flash/ thumb drive and a laptop containing
portions of the Goldman source code . When Aleynikov flew back
the following day, he was arrested by the Federal Bureau of
Investigation ("FBI") agents at Newark Liberty International
Airport. The source code was also found on defendant's home
computer .

In a statement to FBI agent Michael McSwain, defendant
admitted to intentionally collecting both open and proprietary
source code, with the idea of separating out the open source code
once he had downloaded it to his home computer.

Defendant was initially charged in a federal indictment that
accused him of violating the Economic Espionage Act of 1996
("EEA") , 18 USC § 1832, by downloading a trade secret "that is
related to or included in a product that is produced for or
placed in interstate or foreign commerce," with the intent to
convert such trade secret and to injure its owner, to the
economic benefit of anyone other than the owner (see 18 U.S.C. §
1832(a) [Count One]); and with violating the National Stolen
Property Act ("NSPA") , 18 U.S.C. § 2314, which makes it a crime

5

to " transport [ ] , transmit [ ] , or transfer [ ] in interstate or
foreign commerce any goods , wares , merchandise , securities or
money, of the value of $5,000 or more, knowing the same to have
been stolen, converted or taken by fraud" (18 U.S.C. § 2314
[Count Two] ) . A third count charged him with unauthorized
computer access and exceeding authorized access in violation of
the Computer Fraud and Abuse Act ("CFAA") , (18 U.S.C. § 1030).

Aleynikov moved to dismiss the federal indictment for
failure to state an offense. On September 3, 2010, the district
court dismissed Count Three of the indictment after finding that
defendant's conduct did not fall within the federal anti-hacking
statute but otherwise denied Aleynikov 's motion (see United
States v. Aleynikov , 737 F.Supp.2d 173 [SDNY 2010]).

After a jury trial , defendant was convicted on both
remaining counts and sentenced to 97 months of imprisonment
followed by a three-year term of supervised release, and was
ordered to pay a $12,500 fine. Bail pending appeal was denied
because Aleynikov, a dual citizen of the United States and
Russia, was feared to be a flight risk.

On February 17, 2012, Aleynikov appealed his conviction and
sentence, arguing that his conduct did not constitute an offense
under either the NSPA or EEA. The Second Circuit reversed
Aleynikov 's convictions on both counts, concluding, as the People

6

point out, that defendant's conduct did not fit within the narrow
confines of the two federal statutes under which he was charged,
(see United States v. Aleynikov , 676 F.3d 71, 73- 75 [2d Cir.
2012]; see Affirmation of ADA Joanne Li, dated November 29, 2012,
p. 3).

Thereafter, in April 2012, the Office of the New York County
District Attorney ("DANY") became aware of the Second Circuit's
decision reversing defendant's federal conviction (see
Affirmation of ADA Joanne Li, dated November 29, 2012, p. 1-2, f
3). In reversing defendant's conviction, the Second Circuit
observed :

The conduct found by the jury is conduct

that [defendant] should have known was in

breach of his confidentiality obligations

to Goldman, and was dishonest in ways that

would subject him to sanctions ; but he could

not have known that it would offend this criminal

law or this particular sovereign,

referring to the federal statutes under which he was

prosecuted ( United States v. Aleynikov , 676 F.3d, at 82).

The People took this as an "invitation" (see Affirmation of

ADA Joanne Li, dated November 29, 2012, p. 4). After reviewing

the Second Circuit's decision, DANY contacted the federal

prosecutor' s office to express interest in pursuing a state

prosecution of defendant and on July 31, 2012, charged defendant,

by arrest warrant, with one count of Unlawful Duplication of

7

Computer Related Material in the First Degree (Penal Law §
156.30[1]) and one count of Unlawful Use of Secret Scientific
Material (Penal Law § 165.07) . A New York County Grand Jury
then indicted defendant on each of the counts in the arrest
warrant .

The motion for inspection and/or dismissal of the Grand Jury
minutes is granted to the extent that the Court has examined the
Grand Jury minutes in camera and found both the testimonial and
documentary non-hearsay evidence before the Grand Jury to be
legally sufficient, the instructions to be proper and the
proceeding to be otherwise unimpaired. The issues in the
defendant's motion, while numerous, are straightforward, and
disclosure of the Grand Jury minutes is not necessary to their
resolution (see CPL § 210. 30 [3]). Accordingly, the motion to
dismiss the indictment on these grounds is denied.

The Court specifically notes that the indictment satisfies
the CPL 200.50(7) requirement that the indictment contain a
"plain and concise factual statement in each count which, without
allegations of an evidentiary nature [and it] ... asserts facts
supporting every element of the offense charged and the
defendant's or defendants' commission thereof with sufficient
precision to clearly apprise the defendant or defendants of the
conduct which is the subject of the accusation" (see People v

8

Iannone, 45 N.Y.2d 589 [1978]). "[T]he charges use the language
of the statutes involved, unless the language is too broad"
( People v. Perez , 93 AD3d 1032, 1034 [3 rd Dept.], lv. den. 19 NY3d
1000 [2012] , citing Iannone, 45 N.Y.2d, at 599) . In this case,
the indictment not only tracked the statutory language, it
provided additional information as to the location, date and time
of the offenses, thus alleging "where, when and what" defendant
purportedly did (Perez, 93 AD3d, at 1034, quoting Iannone, 45
N.Y.2d at 598) .

With respect to the legal sufficiency of the indictment, an
indictment is legally sufficient when "it possesses competent
evidence that establishes every element of an offense by legally
sufficient evidence and provides reasonable cause to believe that
a person has committed such offense" ( People v. Williams , 20 AD3d
72 [1 st Dept.], lv. denied 5 NY3d 811 [2005]; see CPL 190.65[1]
People v. Swamp , 84 N.Y.2d 725, 729-730 [1995]). "[A] reviewing
court must consider ^whether the evidence viewed in the light
most favorable to the People, if unexplained and uncontradicted,
would warrant conviction by a petit jury'" ( People v. Grant , 17
NY3d 613, 616, quoting People v. Bello , 92 N.Y.2d 523, 525
[1998], quoting People v. Jennings , 69 N.Y.2d 103, 114 [1986]).
Legally sufficient evidence is "competent evidence which, if
accepted as true, would establish every element of an offense

9

charged" ( Grant , 17 NY3d, at 616, quoting CPL 70.10 [1]; see also

People v. Swamp , 84 N.Y.2d, at 730; People v. Mayo , 36 N.Y.2d

1002, 1004 [1975]). "In the context of a Grand Jury proceeding,

legal sufficiency means prima facie proof of the crimes charged,

not proof beyond a reasonable doubt" ( id. , quoting Bello , 92

N.Y.2d, at 526). Thus, a reviewing court must determine "whether

the facts, if proven, and the inferences that logically flow from

those facts supply proof of every element of the charged crimes , "

and whether "the Grand Jury could rationally have drawn the

guilty inference" ( id. , quoting People v. Deegan , 69 N.Y.2d 976,

979 [1987]) and defer all questions as to whether the weight or

quality of the evidence would warrant conviction ( Swamp , 84 N.Y.,

at 730; see People v. Williams , 20 AD3d 72) .

The Court notes that the Grand Jury presentation was

comprised of non-hearsay testimonial and documentary evidence.

With respect to the Unlawful Duplication of Computer Related

Material in the First Degree count, Penal Law § 156.30(1) states:

A person is guilty of unlawful duplication
of computer related material in the first
degree when having no right to do so, he ...
copies, reproduces or duplicates in any
manner :

1. any computer data or computer program
and thereby intentionally and wrongfully
deprives or appropriates from an owner thereof
an economic value or benefit in excess of
two thousand five hundred dollars; . . .

10

Penal Law § 156.00(1) defines "Computer" as

a device or group of devices which, by-
manipulation of electronic, magnetic, optical or
electrochemical impulses , pursuant to a computer
program, can automatically perform arithmetic,
logical, storage or retrieval operations with or
on computer data, and includes any connected or
directly related device, equipment or facility
which enables such computer to store, retrieve or
communicate to or from a person, another computer
or another device the results of computer
operations , computer programs or computer data .

Penal Law § 156.00(2) defines "Computer program" as

property and means an ordered set of data
representing coded instructions or statements
that, when executed by computer, cause the
computer to process data or direct the computer
to perform one or more computer operations or both
and may be in any form, including magnetic storage
media, punched cards, or stored internally in the
memory of the computer.

Penal Law § 156.00(3) defines "Computer data" as

property and means a representation of
information, knowledge, facts, concepts or
instructions which are being processed, or have
been processed in a computer and may be in any
form, including magnetic storage media, punched
cards, or stored internally in the memory of the
computer .

Penal Law § 156.00(4) defines "Computer service" as

any and all services provided by or through
the facilities of any computer communication
system allowing the input, output, examination, or
transfer, of computer data or computer programs
from one computer to another.

Penal Law § 156.00(6) defines "Computer network" as

11

the interconnection of hardwire or wireless
communication lines with a computer through remote
terminals, or a complex consisting of two or more
interconnected computers .

Penal Law § 156.00(7) defines "Access" as

to instruct, communicate with, store data in, retrieve
from, or otherwise make use of any resources of a
computer, physically, directly or by electronic means.

Penal Law § 156.00(8) defines "Without authorization" as

to use or to access a computer, computer service or
computer network without the permission of the owner or
lessor or someone licensed or privileged by the owner
or lessor where such person knew that his or her use or
access was without permission or after actual notice to
such person that such use or access was without
permission. It shall also mean the access of a
computer service by a person without permission where
such person knew that such access was without
permission or after actual notice to such person, that
such access was without permission.

Proof that such person used or accessed a computer,
computer service or computer network through the
knowing use of a set of instructions, code or computer
program that bypasses, defrauds or otherwise
circumvents a security measure installed or used with
the user's authorization on the computer, computer
service or computer network shall be presumptive
evidence that such person used or accessed such
computer, computer service or computer network without
authorization .

Here , there was sufficient evidence that while defendant may
have had a limited right to copy or reproduce some of the
material for work-related reasons, he had no right to install and
use "subversive" software on Goldman Sachs' computer for the
purpose of copying, reproducing or duplicating in any manner the

12

copyrighted source codes or any other copyrighted computer data
or computer program to intentionally and wrongfully deprive or
appropriate from Goldman Sachs, as the materials' "owner," an
economic value or benefit in excess of two thousand five hundred
dollars. The evidence includes testimony and exhibits that
establish that on two or more occasions, defendant, without
permission or authority from Goldman Sachs, copied and
transferred Goldman Sachs' source code for its high frequency
trading platform from Goldman Sachs' computers to a foreign
server in Germany using subversive software, and then downloaded
this material onto his personal computers and thumb drives, thus
making a tangible electronic reproduction of confidential and
proprietary materials related to Goldman's source code. Indeed,
defendant does not contest that he actually did reproduce the
relevant materials. Additionally, the Grand Jury could infer
from the confidentiality/employment agreement signed by defendant
when he was hired by Goldman Sachs as well as the employee
handbook setting forth the firm' s policies forbidding the
disclosure of information concerning or contained in the programs
on the firm' s computers that defendant' s actions "were motivated
either by an intention to sell them, use them in his new position
in order to advance himself or to save himself labor, or at the
very least, to study and learn from them" ( People v. Katakam , 172

13

Misc. 2d 943, 947 [Sup. Ct. N.Y.Co. 1997]). This is further

supported by evidence that as part of his new job, for which

defendant was being paid a million dollars, his new employer

wanted a program, which had taken years to develop at Goldman

Sachs, up and running in six months. There is also evidence that

the material copied and reproduced by defendant was worth

millions to Goldman Sachs . Thus , the evidence is clearly

sufficient to show that defendant' s actions deprived Goldman

Sachs of and appropriated from Goldman Sachs an economic benefit

in excess of $2500.

Likewise, Penal Law § 165.07 states:

A person is guilty of unlawful use of secret
scientific material when, with intent to
appropriate to himself or another the use of
secret scientific material, and having no right
to do so and no reasonable ground to believe
that he has such right, he makes a tangible
reproduction or representation of such secret
scientific material by means of writing,
photographing, drawing, mechanically or
electronically reproducing or recording such
secret scientific material.

Penal Law §165.00(6) defines "Secret scientific material" as:

a sample, culture, micro-organism, specimen,
record, recording, document, drawing or any other
article, material, device or substance which
constitutes, represents, evidences, reflects, or
records a scientific or technical process,
invention or formula or any part or phase thereof,
and which is not, and is not intended to be,
available to anyone other than the person or
persons rightfully in possession thereof or

14

selected persons having access thereto with his
or their consent, and when it accords or may accord
such rightful possessors an advantage over
competitors or other persons who do not have
knowledge or the benefit thereof.

In People v. Russo , 131 Misc. 2d 677 (Cty Ct. Suffolk Co. 1986),

found that computer programs qualifies as "secret scientific

material" whose unlawful use was prohibited by Penal Law §165.07.

As the Russo Court notes:

. . .a computer program does not just exist.
It is the result of time spent and effort
exerted on the part of a trained individual
or individuals . Because such training
requires study and the learning associated
with such study results in a specialized
knowledge, the resulting program— in accordance
with the above definitions— can therefore be
described as both "scientific" and "technical."
Because the "computer program" directs a computer
to perform steps in a prescribed procedure and
operations on data to produce a desired result,
it is a "process." Further, because a "computer
program" does not exist until it is written or
created as a result of an individual ' s study or
experimentation, or, if the computer program
already exists, and is modified in some way to
make it different or new, it is, an "invention.
"Finally, because a "computer program" represents
a method of doing something that relies on "an
established model or approach," a "computer
program" is a "formula" in accordance with the
definition above. Therefore, based on the above,
a "computer program" qualifies as "a scientific or
technical process, invention, or formula" as
envisioned by Penal Law § 155.00(6) .

( id. , at 681) .

Here, the Grand Jury minutes again established through

15

testimony and exhibits that defendant, at the very least, with
intent to appropriate to himself "secret scientific material,"
and knowing he no right to do so because the copy was not made
for his work at Goldman, made a copy of certain Goldman computer
programs and source code, which were "secret scientific material"
(see People v. Russo , supra) . Thus, the evidence in support of
these counts were also legally sufficient.

Defendant also claims that the instant prosecution is barred
by State and Federal double jeopardy as well as statutory double
jeopardy. Here, defendant was prosecuted in federal court for
violating the EEA and NSPA. A jury convicted him of these
crimes . On appeal , the Circuit Court of Appeals for the Second
Circuit reversed the conviction and dismissed the charge,
"reasoning that while defendant breached his confidentiality
obligations to Goldman, his conduct did not fall within the scope
of the charged federal offenses" ( Aleynikov v. The Goldman Sachs
Group , Inc . , 2012 WL 6603397, *3 [NDNJ 2012]). Upon the
dismissal of the federal charges against defendant, the New York
County District Attorney presented the case to a New York County
Grand Jury, which indicted defendant of violating Penal Law §§
156.30(1) and 165.07.

The Double Jeopardy clause of the Fifth Amendment provides
that an individual may not be tried twice for the same offense

16

except in limited circumstances . However, under the "dual

sovereignty" doctrine, successive State and federal prosecutions

for the same conduct are not prohibited by the United States

Constitution's Double Jeopardy Clause (see Matter of Polito v.

Walsh , 8 NY3d 683, 686 [2007], rearg. denied 9 NY3d 918 [2007],

citing Bartkus v. Illinois , 359 U.S. 121 [1959]). Thus, the

Blockburger "same-elements" test does not apply here (see

Blockburger v. United States , 284 U.S. 299, 304 [1932]; Matter of

Polito v. Walsh , 8 NY3d, 689-690) .

In New York, double jeopardy is both constitutional and

statutory ( Matter of Polito v. Walsh , 8 NY3d, at 686) . Statutory

double jeopardy is governed by CPL 40.20, which "generally

prohibits successive prosecutions for two offenses based on a

single act or criminal transaction" ( People v. Bryant , 92 N.Y.2d

216, 226 [1998] [citations omitted]; see Matter of Polito v.

Walsh , 8 NY3d, at 686) . Despite this statutory bar, pursuant to

CPL 40.20 (2) (f ) , sequential prosecutions are permitted for

offenses arising from the same criminal transaction where:

One of the offenses consists of a violation of
a statutory provision of another jurisdiction,
which offense has been prosecuted in such other
jurisdiction and has there been terminated by a
court order expressly founded upon insufficiency
of evidence to establish some element of such
offense which is not an element of the other
offense, defined by the laws of this state

17

(see Matter of Polito v. Walsh , 8 NY3d, at 686-687) .

In this case, the first prosecution of defendant was for
violations of statutory provisions of another jurisdiction,
namely, the federal EEA and NSPA statutes. Defendant was
prosecuted for it in "such other jurisdiction," namely, the
federal court. The federal prosecution was terminated by the
Second Circuit. The Second Circuit's order was "expressly
founded on insufficiency of the evidence" to establish that
Goldman' s HFT system was intended for interstate or foreign
commerce as required by the EEA and that the intangible property
stolen by defendant, such as the source codes, constituted stolen
"goods," "wares" or "merchandise" under the NSPA. There is no
corresponding requirement under either Penal Law 156.30(1) or
165.07, which are the New York State statutes that the defendant
is accused of violating, that the property in question be
intended for interstate commerce. Similarly, there is no
requirement under either Penal Law 156.30(1) or 165.07 that the
property stolen by defendant, be tangible "good," "wares" or
"merchandise" as required by the NSPA. Thus, "CPL 40.20(2) (f)
was evidently written for the purpose of preventing people in the
exact situation of [this defendant] from relying on the
protection given by CPL 40.20(2)" ( Matter of Polito v. Walsh , 8
NY3d, at 687) .

18

The Court notes that CPL 40.20(1), which states that:

A person may not be twice prosecuted for the
same offense, . . .

does not assist defendant. As the Court of Appeals has held, the

same offense "means the same in both fact and law. . .At bar, the

prosecutions are not the same in law because they are based upon

separate and distinct statutes...." ( Matter of Polito v. Walsh , 8

NY3d, at 688, quoting Matter of Klein v. Murtaqh , 34 N.Y.2d 988

[1974], aff'g on op below 44 A.D.2d 465, 467 [2d Dept. 1974]).

Defendant tries to argue that CPL 40.20(2) (f) does not apply
because the federal case was not dismissed for insufficiency of
evidence, as required by CPL 40.20(2) (f ) , but rather, for facial
insufficiency of the indictment (Defense Motion : 37n . 11) . The
Court disagrees. As the People point out, the Second Circuit
specifically noted that although it was "odd" that the parties on
appeal had framed their arguments in terms of facial
insufficiency of the indictment since the case had gone to trial,
their decision was the same under either analysis (see People's
Response:17; United States v. Aleynikov , 676 F.3d, at 76, n. 3).
Thus, CPL 40.20 (2) (f ) ' s requirement that the federal case be
dismissed for insufficiency of a federal element is satisfied.

As to defendant' s claim that the instant prosecution is
barred because Judge Denise Cote of the Southern District of New

19

York dismissed the count based on a violation of the CFAA charge
prior to trial, that claim is meritless . Because that count was
dismissed prior to trial, defendant was never placed in jeopardy
for it (see CPL 40.30) and defendant is not charged with the
equivalent cyber-crime statute, namely, Penal Law § 156.10.
Specifically, the CFAA count was dismissed from the federal
indictment during motion practice because the federal anti-
hacking statute required proof that the defendant had gained
access to Goldman's computers without permission or
authorization. However, neither of the crimes defendant is
charged with in his State indictment requires that his access to
Goldman's computers be unauthorized.

Accordingly, the instant prosecution is not barred under
double jeopardy grounds and is expressly permitted under CPL
40.20 (2) (f) .

Defendant further argues the doctrine of collateral estoppel
mandates that the indictment be dismissed. Collateral estoppel
"means simply that when an issue of ultimate fact has once been
determined by a valid and final judgment, that issue cannot again
be litigated between the same parties in any future lawsuit"
( People v. Sommerville , 3 Misc3d 593, 598 [Sup. Ct Kings Cop.
2004], quoting Ashe v. Swenson , 397 U.S. 436, 443 [1970]). If
"the 'ultimate fact' issue, i.e., that which is essential to

20

conviction in the later trial is resolved in defendant's favor,
the subsequent prosecution is foreclosed" ( People v. Sonimerville ,
3 Misc. 3d, 598, citing People v. Goodman , 69 N.Y.2d 32, 38
[1986]). "However, if the resolved issue concerns an
'evidentiary' fact tending to establish guilt at the second
trial, the subsequent prosecution is not precluded, only , further
litigation' of this 'evidentiary' fact is prohibited" ( id. ,
citing People v. Acevedo , 69 N.Y.2d 478 [1987]).

It is well settled that the doctrine of collateral estoppel
applies to criminal proceedings as well as civil ones ( People v.
Goodman , 69 N.Y.2d 32, 37 [1986] [citations omitted]; see also
People v. Hilton , 95 N.Y.2d 950, 952 [2000]; Sommerville , 3
Misc3d, at 598) , and operates to "bar relitigation of issues
necessarily resolved in defendant's favor at an earlier trial"
( People v. Acevedo , 69 N.Y.2d 478, 485 [1987]; see also People v.
Evans, 94 N.Y.2d 499, 502 [1999]; see also Sommerville , 3 Misc3d,
at 598) .

Although part of the constitutional guarantee against
double jeopardy (Goodman, 69 N.Y.2d at 37, citing Ashe v.
S wens on , 397 U.S. 436; People v. Moore , 220 A.D.2d 621, 622,
appeal denied 87 N.Y.2d 923), double jeopardy differs from
collateral estoppel in that double jeopardy applies to
subsequent prosecutions involving the same offense and "may

21

attach long before the jury has rendered a verdict, whereas
collateral estoppel applies only when there has been a final
judgment" followed by new or different charges arising from the
same incident ( Goodman , 69 N.Y.2d at 37-38).

However, "[b]efore collateral estoppel may be applied in a
subsequent criminal case, there must be an identity of parties
and issues and a prior proceeding resulting in a final and valid
judgment in which the party opposing the estoppel had a ^ull
and fair opportunity' to litigate" ( People v. Suarez , 40 AD3d
143, 152 [1 st Dept.], lv. denied 8 NY3d 991 [2007], quoting
Goodman, 69 N.Y.2d at 38 [citations omitted]). The defendant
must also establish that the issue was necessarily decided in
the first proceeding ( Acevedo , 69 N.Y.2d at 484-485; Goodman , 69
N.Y.2d at 40)" ( Sommerville , 3 Misc3d, 598-599). "The
[collateral estoppel] rule is not to be applied with a
hypertechnical approach but with realism and rationality"
(Acevedo, at 69 N.Y.2d at 487, quoting People v. Goodman , 69
N.Y.2d at 40; see also People v. Roselle , 84 N.Y.2d 350, 357
[1994]). Applying these principles to the instant case, it is
evident that collateral estoppel is inapplicable.

Here, the jury's findings lost their preclusive effect as
defendant' s federal judgment of conviction was reversed on
appeal, and therefore, "does not constitute 'a final and valid

22

judgment,' the jury's factual findings lose their preclusive
effect" ( id. , citing People v. Brown , 59 A.D.2d 928 [2d Dept.
1977]; see also People v. Plew , 52 N.Y.2d 58, 69 [1980]
[Fuchsberg, J. concurring] ; Matter of McGrath v. Gold , 36 N.Y.2d
406, 412 [1975]). Moreover, there is no identity of parties and
issues as the New York County prosecutor did not have a "full
and fair opportunity" to litigate in defendant's federal matter.
Accordingly, defendant's motion for an order dismissing the
instant indictment on collateral estoppel grounds is denied.

Defendant attempts to get around the problem in his
arguments by suggesting that the "dual sovereignty" exception to
the Fifth Amendment does not apply because the State prosecutors
are acting as a "tool" for the Federal prosecutors and the State
prosecution is merely a "sham and a cover" masking a second
prosecution by the same sovereign as the first. However, there
is no evidence, apart from defendant's speculation, to support
this claim. Indeed, according to the People, they, upon reading
the decision of the Second Circuit reversing and dismissing
defendant's case, decided on their own to see if there was a
viable State criminal prosecution before approaching the feds .
Hence, the State prosecution cannot be considered a sham or
cover for masking a second federal prosecution given the
differences in the conduct prohibit by the respective statutes.

23

As to defendant' s claim that the indictment must be
dismissed as it is a "vindictive prosecution," the Court finds
this claim also to be without merit. Defendant claims that he
is entitled to a presumption of vindictiveness as he speculates
"that he is being punished not for any crime he may have
committed, but for having the audacity to exercise his
constitutional right to appeal his federal sentence and
conviction and to prevail on that appeal" (DML:54). According
to defendant, the Second Circuit's reversal of his federal
conviction was "deeply embarrassing to the United States
Attorney's Office and the Federal Bureau of Investigations, and
particularly to the prosecutors and agents involved in the case"
(DML:54). 4 Accordingly, defendant posits, their animus to
defendant is the reason for the State prosecution.

In this case, the State of New York is a separate and
distinct sovereign than the federal government. Neither stands
in the shoes of the other. Therefore, the fact that the State
indicted defendant for violating New York State criminal
statutes after the Circuit Court of Appeals for the Second
Circuit overturned defendant' s federal conviction and dismissed

defendant seems to believe that the embarrassment caused by
the extensive press coverage in this case relating to the
reversal of defendant's federal conviction (DML:55).

24

the underlying indictment, does not amount to a vindictive
prosecution as defendant is being prosecuted "by two different
sovereigns , each acting independently under its own laws and in
its own interest without any control of or by the other, [thus,]
render [ing] inapplicable the concept of prosecutorial
vindictiveness" ( United States v. No , 699 F.2d 63, 68 [2d Cir.
1983]). Here, DANY, in deciding whether to pursue a subsequent
prosecution, took into consideration what it deemed to be an
"inadequate result" obtained in defendant's federal case ( id. ) .
The fact that DANY did not originally pursue criminal charges
against defendant in light of the federal proceedings, in no way
prevents the state government, as represented by DANY, from
protecting a legitimate New York State interest if it believes
that defendant' s federal proceeding has failed to adequately
protect its interests.

Moreover, defendant has presented no evidence that the
State of New York was acting at the behest of the federal
government in bringing the state charges against him, or that
the federal government acted as an agent of the State in
prosecuting him for violation of either the EEA or the NSPA.
Though defendant makes conclusory accusations of conspiracy and
collusion between the state and federal prosecutors, the record
indicates simply that, after defendant's federal conviction was

25

vacated and the underlying indictment dismissed, DANY undertook
an independent analysis and concluded that "significant" New
York State interests "had been left unvindicated by the federal
proceeding." While defendant complains that the State
prosecution was motivated by the dissatisfaction of the United
States Attorney with the outcome of the federal proceeding
against him as a result of the Second Circuit's decision, even
assuming arguendo that was a factor in the State's decision to
prosecute defendant, it was plainly a permissible consideration
in the assessment of whether the State's interests have been
vindicated (see United States v. Arena 180 F.3d 380, 389-400 [2d
Cir. 1999], cert denied 531 US 811 [2000]).

Even assuming, as defendant does, that the timing of this
indictment, coupled with the defendant's successful appeal of
his federal court conviction, raises an inference that the
prosecution may have been motivated for vindictive reasons ,
these factors alone do not create a presumption of
vindictiveness ( People v. Bell , 11 Misc3d 1070(A) [Cty. Ct.
Monroe Co. 2006], aff'd on opinion below 46 AD3d 1465 [4 th Dept.
2007], citing United States v. Koh , 199 F3d 632, 639-640 [2d
Cir. 1999]) . Defendant has failed to present any direct
evidence, such as a statements by a prosecutor that evinces a
vindictive motive or that the district attorney's office, is, in

26

fact, prosecuting defendant for vindictive reasons ( id. ) .
Therefore, this portion of the defendant's motion must also
fail.

Turning to defendant's next claim, namely, that the instant
indictment should be dismissed in the interests of justice
pursuant to CPL 210.40, defendant claims that "from July 3, 2009
to the present date has really been a living hell" for him
(January 18, 2013 oral argument minutes ["OR"]: 4). Defendant
complains that he has been "punished enough" because, as a
result of his federal prosecution, he has lost his home, his
family, his savings and his reputation (OR:5-6). However, as
the People noted, "the defendant's conduct [was], in fact,
criminal conduct. The act of duplicating or re-reproducing
(sic) computer data or computer program[s] is criminal behavior."
Accordingly, defendant's motion is denied.

A Court has the discretion to dismiss a criminal action in
the interests of justice and fairness so that justice may
prevail over the strict letter of the law and to prevent a
miscarriage of justice (see People v. Clayton , 41 A.D.2d 204 [2d
Dept. 1973]; People v. Andrew , 78 A.D.2d 683 [2d Dept. 1980];
CPL 210. 40 [1]). However, the Courts have made it clear that the
discretionary power to dismiss an indictment in the interest of
justice is to be used sparingly and should only be granted when

27

the facts and circumstances are such that to deny the motion
would shock the conscience of the Court {see People v. Rickert ,
58 N.Y.2d 122 [1983]; People v. Quadrozzi , 55 AD3d 93, 103 [2d
Dept. 2008]; People v. Harmon , 181 A.D.2d 34, 36 [1st Dept.
1992]; People v. Debiasi , 160 A.D.2d 952 [2d Dept. 1990]; ).
Therefore, the Court must scrutinize the merits of the
defendant' s application and weigh the respective interests of
the defendant, the complainant and the general public to see if
compelling factors must exist that "clearly demonstrat [e]
that. . .prosecution upon such indictment or count would
constitute or result in an injustice" (CPL § 210. 40 [1] ; see CPL
§ 210.20; see also People v. Jenkins , 11 NY3d 282, 287 [2008];
People v. Belkota , 50 A.D.2d 118 [4th Dept. 1975]; People v.
Clayton, 41 A.D.2d, at 208) .

In deciding a motion to dismiss in the interest of justice,
the ten factors that the Court must, to the extent applicable,
examine and consider are:

(1) seriousness and circumstances of the offense;

(2) the extent of harm caused by the offense;

(3) the evidence of guilt, whether admissible at trial
or not;

(4) the history, character and condition of the
defendant;

(5) any exceptionally serious misconduct of law

28

enforcement personnel in the investigation, arrest and
prosecution of the defendant;

(6) the purpose and effect of imposing upon the
defendant a sentence authorized for the offense;

(7) impact of dismissal on the safety or welfare of the
community;

(8) impact of dismissal upon the confidence of the
public in the criminal justice system;

(9) where the Court deems it appropriate, the attitude
of the complainant or victim with respect to the
motion; and

(10) any other relevant factors indicating that a
judgment of conviction would serve no useful purpose

(CPL 210.40; see People v. Jenkins , 11 NY3d, at 287).

Considering these factors, both individually and collectively,

set forth in CPL 210.40(1) (a-j), this Court is not convinced

that this is the type of extraordinary circumstances

contemplated by the statute requiring dismissal in the interest

of justice.

Turning to these factors, with respect to the seriousness
and circumstances of the offense, the instant case is neither
rare nor unusual . Defendant was indicted and accused of
committing the "E" felony offenses of Unlawful Duplication of
Computer Material in the First Degree (Penal Law § 156.30 [1])
and Unlawful Use of Scientific Material (Penal Law § 165.07) (two
counts). The counts arise from defendant's alleged scheme to

29

steal Goldman Sachs' source code and computer programs by
copying and reproducing them. As the Court of Appeals has
recognized, in 1986, the New York State Legislature enacted
these statutes in an effort to combat the increase in computer
crime and abuse (see People v . Versaggi , 83 N.Y.2d 123, 128
[1994]; see also People v. Katakam , 172 Misc. 2d 943, 945 [Sup.
Ct. N.Y. Co. 1997]). Clearly, these are serious crimes.

As to the extent of harm caused by the offense, this is not
a victimless crime. Clearly, Goldman Sachs and their clients
are victims of defendant' s actions . As the Court in a similar
case noted, "[t]he harm suffered by Goldman Sachs ... can be
measured by the cost of their investigation and the disruptions
they may have suffered" ( People v. Katakam , 172 Misc. 2d, at 949-
950) .

As to the evidence of guilt, whether admissible at trial or
not, it appears to be overwhelming based on the Grand Jury
presentation. At the Grand Jury presentation, the People
presented testimony by eyewitnesses, documents and e-mails that
showed how defendant violated the Unlawful Duplication of
Computer Material in the First Degree (Penal Law § 156.30 [1]) and
Unlawful Use of Scientific Material (Penal Law § 165.07)
statutes . The Court notes that while the Second Circuit reversed
defendant' s conviction based on a technicality in the federal

30

statute, defendant was convicted of similar acts by a federal
jury. Further, while at defendant's federal trial, defendant's
supervisor Adam Schlesinger, may have testified that defendant
had full access to the source code relating to Goldman's HFT
business and Paul Walker of Goldman, may have testified that as
part of his job, defendant not only had access to the source code
and was required to make copies of the code in performing his
daily functions, defendant was limited to using his access to
that material within the confines of his employment and not free
to copy it for any reason unrelated to Goldman's business (see
DML: 66) . 5

As to the history, character and condition of the defendant,
defendant states that he was born in Moscow, Russia and he came
to the United States determined "to build a successful life"
(DML: 67) . He further states that he is a father and has had no
other contact with the law apart from this case . Defendant is a
"highly skilled programmer who was poised to put his prodigious
skills back to use" (DML: 67) without any criminal history.
However, without disputing the defendant's accomplishments, or
rejecting their significance, his contributions do not justify
dismissal of charges (see People v. Kelley , 141 A.D.2d 764 [2d

DML" refers to Defendant's Memorandum of Law.

31

Dept. 1988] ["The mere fact that the defendant may be a police
officer ... or has an exemplary background ... is insufficient to
justify the exercise of the court's discretion" to dismiss an
indictment charging the defendant with DUI] [citations omitted] ;
People v. Varela , 106 A.D.2d 339, 340 [1st Dept. 1984] [dismissal
in interest of justice not warranted based on defendant's
" * exemplary' background at work, in the Air Force, as a father
and as a civic affairs volunteer"] ; see also People v. Norman , 5
Misc3d 1016 [A] ) .

Specifically, defendant's argument that the case should be
dismissed because defendant has already served a year in jail as
well as "suffered economic [and reputation] loss and humiliation
as a result of these events is not compelling" ( People v.
Katakam, 172 Misc. 2d, at 950) . Unfortunately for defendant, his
character does not warrant a dismissal in the furtherance of
justice. Indeed, a lack of a prior criminal conviction and
defendant' s good standing in the community do not constitute
compelling reasons for dismissal (see People v. Riccelli , 149
A.D.2d 941, 942 [4 th Dept. 1989]; People v. Varela , 106 A.D.2d,
at 340; People v. Litman , 99 A.D.2d 573 [3 rd Dept. 1984]). As
other courts have observed, "[t]he same argument [s] can be made
by anyone in defendant's position, and ignores the fact that the
Legislature intended to criminalize the type of behavior of which

32

he is accused in order to deter it. Society is ever more
dependent on the computer and the potential harm by those who are
in a position to abuse their expertise is considerable. It is
unfortunate that there may be collateral consequences to
defendant should he be convicted, but these do not warrant
dismissal of the indictment" ( People v. Katakam , 172 Misc. 2d, at
950) .

As to any exceptionally serious misconduct of law
enforcement personnel in the investigation, arrest and
prosecution of the defendant this Court finds that there has been
none of which the Court is aware. Defendant's complaint of
misconduct is based on his view that the FBI misled the Court to
issue an arrest warrant and that the instant prosecution by the
People is just an extension of the failed federal prosecution is
meritless. While it is true that the People only chose to
proceed once the federal courts stated that they did not have
jurisdiction, there is no evidence that the FBI or the United
States Attorney for the Southern District of New York in any way
influenced the People's choice to proceed.

As to the purpose and effect of imposing upon the defendant
a sentence authorized for the offense, the purpose of every
sentence passed on a criminal offender is directed towards
achieving one or more of four basic ends: deterrence, separation,

33

rehabilitation and retribution. The major underlying theory
behind these sentencing ends is that the fear of possible death,
incarceratory punishment or suffering will operate in some way in
the minds of the lawbreakers to deter them from committing future
criminal acts, thus, resulting in a determinant effect on
offender recidivism (Burns, Philosophy of Sentencing [U.S.
District Court, Portland, Oregon] ; The National Judicial College,
"Sentencing", ABA at University of Nevada, Ch. 1, at 1-5
[September 1978] as cited in People v. Vecchio , 139 Misc. 2d 165,
169 [1987] ) .

Considering, individually and collectively, the "four basic
ends" to sentencing, defendant faces a potential sentence of up
to four years imprisonment. The deterrent value in the possible
maximum sentence is obvious . The retribution end is also obvious
in the loss of defendant's reputation and his economic loss.

The Court does not believe rehabilitation is relevant under
the facts of this case .

Additionally, in considering the purpose and effect of
imposing a sentence upon defendant, the State's general interest
in imposing the authorized sentence is obvious ; the citizens of
New York have an interest in having a guilty defendant sentenced
for computer related offenses which are serious offenses .
Deterrence is a legitimate State's purpose. That the People

34

offered defendant a plea to a non-jail sentence is of no moment
as to whether the indictment should be dismissed. It is the
Court, and not the People, who decides what the appropriate
sentence is in any given case, and it will be this Court that
decides whether a period of incarceration is merited under the
facts of this case (see People v. Farrer , 52 N.Y.2d 302, 305-306
[1981]) . Moreover, while defendant focuses on an incarceratory
sentence, he forgets that there are alternative sentences that
this Court can also impose such as probation, where defendant's
conduct would be monitored by the Department of Probation.

As to the impact of dismissal on the safety or welfare of
the community, this Court does not believe that a dismissal in
this case will have any impact one way or the other.

As to the impact of dismissal upon the confidence of the
public in the criminal justice system, the Court believes that
dismissal will have a negative impact. Given the continuing and
growing reliance on computers, prosecution for these crimes can
serve to remind the Public that no one is above the law and
dismissal of the indictment under these circumstances would
seriously undermine "the confidence of the public in the criminal
justice system."

Finally, the defendant has failed to present "any other
relevant fact indicating that a judgment of conviction would

35

serve no useful purpose . "

The court has evaluated the merits of defendant's arguments,
as well as the applicable factors enumerated in PL 210.40 and
found them to be insufficient to rise to the level required for
the granting of a motion to dismiss in the interest of justice
(see CPL 210.40; People v. Clayton , 41 A.D.2d, at 204). What has
been clearly demonstrated is that the offense with which
defendant is charged is a serious and harmful one and that the
criteria prescribed in CPL 210.40(1) indicates that dismissal in
furtherance of justice is inappropriate. Accordingly, the motion
to dismiss in the interest of justice is denied.

Defendant' s motion for a Huntley-Mapp-Dunaway hearing is
granted.

Defendant's motion for discovery, including with respect to
how the People came to initiate the instant prosecution and the
entire Goldman Trading System, is granted to the extent supplied
by the People. However, if defendant believes that any response
to his demand for Discovery or his request for a Bill of
Particulars is inadequate, he may move to reargue within 10 days
of the service of a copy of this Pretrial Decision and Order.
The People are directed to preserve all evidence including
electronically recorded matter and physical exhibits seized by
law enforcement officials or their agents, and all notes, records

36

memoranda and reports prepared by law enforcement officials or
their agents , including all recorded police communications .

Specifically, the Court notes that discovery matters are
"regulated by statute", i.e. CPL Article 240 ( Matter of Miller v.
Schwartz, 72 N.Y.2d 869, 870 [1988]; see People v. Colavito , 87
N.Y.2d 423, 427 [1996]; Cons tan tine v. Leto , 157 A.D.2d 376, 378
[3d Dept. 1990], af f ' d 77 N.Y.2d 975 [1991]) and may not be
circumvented by the use of a subpoena. A subpoena may also not
be used merely to ascertain the existence of evidence (see Matter
of Terry D. , 81 N.Y.2d 1042, 1044 [1993]; People v. Gissendanner ,
48 N.Y.2d 543, 551 [1979]; People v. Wallace , 239 A.D.2d 272, 273
[1st Dept. 1997] ; ( Matter of Office of Attorney Gen, of State of
N.Y. . 269 A.D.2d 1, 13 [1 st Dept. 2000]; Law Firm of Ravi Batra .
P.C. v. Rabinowich , 77 AD3d 532, 533 [1 st Dept. 2010]). Indeed,
a defendant may not use a subpoena to conduct a "fishing
expedition" ( United States v. Nixon , 418 U.S. 683, 700 [1974]),
in the hope of "unearthing [ ] some unspecified information" that
he is not entitled to under the discovery statutes or otherwise
( Gissendanner , 48 N.Y. 2d at 549; see People v. Villacorte , 76
AD3d 911 [1 st Dept.], lv. denied 15 NY3d 956 [2010]). Rather, a
subpoena must seek "to compel the production of specific
documents that are relevant and material to facts at issue in a
pending judicial proceeding." Matter of Terry D. , 81 N.Y. 2d, at

37

1044 (internal quotations omitted) .

Indeed, defendant must put forth "some factual predicate"
that would make it "reasonably likely that the documentary
information will bear relevant and exculpatory evidence" and not
just potentially relevant evidence ( Constantine v. Leto , 157
A.D.2d 376, 378 [3d Dept. 1990], af f ' d 77 N.Y.2d 975 [1991];
Gissendanner , 48 N.Y.2d at 548-550; see Villacorte , 76 AD3d 911
[1 st Dept. 2010]) . The showing may not be based on speculation
( People v. Baldwin , 211 A.D.2d 638 [2nd Dept. 1995]).
Additionally, a subpoena may not be overbroad nor unreasonably
burdensome as a "witness is not required to cull the good from
the bad" ( People v. Doe , 39 A.D.2d 869, 870 [1st Dept. 1972]; see
Matter of Grand Jury Subpoenas , 72 N.Y.2d 307, 315-16 [1988];
Hynes v. Moskowitz , 44 N.Y.2d 383, 394 [1978]; People v.
Zilberman , 297 A.D.2d 517 [1st Dept. 2002]).

With this in mind, the People argue that defendant, having
been provided with all the discovery to which he is entitled in
the People's Voluntary Disclosure Form ("VDF") , is attempting to
obtain more than that which he is entitled (People's MOL: 56) .
They accuse him, in effect, of being on a fishing expedition.
The Court agrees .

With respect to defendant' s specific request for discovery
into the circumstances under which the New York County District

38

Attorney's Office ("DANY") decided to indict him, including but
not limited to leave to subpoena the DANY and its files and
communications regarding defendant and to take depositions of
DANY attorneys and staff, the People in their response to
defendant' s motion have disclosed all the facts about how the
instant prosecution was initiated to which defendant is entitled
under CPL 240.20.

With respect to defendant's application to "inspect"
Goldman's Trading System and "to make such tests and inspections
to aid his expert witnesses who will be called at trial (Defense
MOL:96). Goldman's computer system is not discoverable nor is the
"entire Trading System" (Defense MOL: 96) within the People's
possession, custody or control nor do they intend to introduce
the entire system into evidence at trial (see CPL 240.20; People
v . Robinson , 53 AD3d 63, 73-74 [2d Dept. 2008]; People v.
Villacorte , 76 AD3d 911 [1 st Dept.]), lv. denied 15 NY3d
956 [2010]). Indeed, the People state that they will only
introduce the specific materials defendant is charged with
copying and transferring (People's MOL: 57). Therefore, all
defendant is entitled to receive is those materials defendant is
charged with misappropriating, material to which both the Court
and the People believe that defendant and his experts already
have access (see United States v. Lee , U.S. dist Lexis 24972, at

39

*7 (ND Cal 2009) .

The Court also finds that defendant' s request for access to
the entire Goldman Trading System to be overbroad and based on
little or no factual predicate. A subpoena is not meant to be
used as a general investigative tool, but rather as a means of
targeting specific documents (see Cons tan tine . 157 A.D.2d at
378) .

Based on the submissions before the Court, it is clear that
the contents of Goldman's "entire Trading System" are not at
issue nor is it necessary for defendant to inspect any of
Goldman's confidential and proprietary material that is unrelated
to the charges in this case. Accordingly, the request for
discovery and inspection of the entire Goldman Trading System is
denied .

ENTER;

Dated; April 5, 2013

40